The purpose of establishing the client’s cash flow and balance sheet is to identify sources of income and expenditure. Moreover, minimum liquidity is required to meet unexpected emergency cash outflow. The balance sheet will tell us whether is there sufficient liquidity. If there is a large positive cash flow but the balance sheet do not reflect the high saving rate, we will have to identify where these surplus cash has gone to. Finally, we need to identify negative equity asset as there is a danger of margin call.

All of the following planning relies on cash flow and balance sheet. Thus the cash flow statements and balance sheet represents the most fundamental items in a comprehensive financial plan.

The purpose of credit management is to identify affordability of taking up a loan (such as a mortgage) and the amount of downpayment that can be afforded from balance sheet point of view. Moreover, if the clients have numerous debts, we will need to convert all interest rates to effective interest rates and rank them from the highest to the lowest. This is to assist the client in paying off his debts in the most efficient manner.

Under this section, a survivor needs analysis is performed to establish the required amount needed in the client’s estate to ensure his dependents are sufficiently provided for.  The amount insurance required for death is established after taking into account of the client’s existing insurance, net asset but excluding personal use assets and residential home.

In addition to the above, we will check to ensure the client has already insured himself for disability income, critical illness, health insurance, liabilities (mortgage) and long-term care insurance.

If the client has children, this is the section which we plan for the amount required to save for the children’s tertiary education. The method we use takes into account of time value for money by establishing the lump sum required now. If the lump sum required now is not available, we will recommend a monthly contribution to meet that goal.

We use expense method to calculate the amount of retirement funding required. The first step is to determine today’s expenditure excluding mortgage, dependents’ cost and luxury. We project the expenditure at retirement based on an assumed inflation. Based on an assumed life expectancy and investment rate, the lump sum retirement funding is determined. If that lump sum is not available now (after discounting time value for money), we will recommend a monthly contribution to achieve that goal.

Both education planning (short time) and retirement planning (long-term) require some elements of investment. However, we treat the clients’ entire wealth (excluding personal use assets and residential home) as a single portfolio. We do not departmentalize into separate and isolated portfolios like “Retirement portfolio” or “Education planning” portfolio.

Everything which the client has is part of that single portfolio. Therefore, we will taken into account of cash deposits, fixed deposits, single premium endowments, SRS balances, CPF Ordinary Account, Special Account, Medisave, funds, stocks, investment properties, as part of the entire portfolio. We will calculate what is the weighted average return of the existing portfolio.

We will then recommend an asset allocation to achieve the desired weighted average return. Because the portfolio is not static, those who have sign up for our Retainer Service will expect us to assist in advising on how to rebalance this portfolio as and when it is needed.

Singapore’s tax law is quite straightforward. However, high income earner may not realize that there are attractive tax saving tools to reduce their tax liabilities. These tax saving tools are not automatic but has to be planned ahead. Some of these tools are Supplementary Retirement Scheme (SRS), CPF Minmum Sum Top-up, CPF Voluntary Contribution scheme and donation to Institutions of Public Character. Using CPF rules to save on taxes can be a complicated affair because CPF rules change almost on a yearly basis.

Those who invest in foreign investments may like to know that they may be taxed by foreign government on their dividends. For example if the dividend yield is 3% and the tax rate is 30%, there is almost a tax expense of 1% per annum. Careful planning can be done to avoid this by investing in other jurisdiction for which there is no dividend tax.

The purpose of estate planning is to ensure the clients’ dependents receive the intended monies to assist them in their lively hood until they are financial independent. Second purpose is to ensure liabilities are paid on the demise of a borrower. Third purpose is to leave behind a legacy to the intended beneficiaries and to ensure unintended beneficiaries do not receive it. Finally but most importantly to ensure that the decease appoints a trusted Executors/Trustees for who will have the fiduciary duty to ensure the estate is managed and distributed for the interest of the beneficiaries.

The tools used in Estate Planning are: Will, CPF Nomination, Revocable Trust, Irrevocable Trust and Portfolio Bonds.